By Owen Burtt
The average cumulative debt of a bachelor’s degree recipient who took out a student loan is $28,400, according to the College Board’s 2020 data. So, how should students start developing good money habits so they aren’t completely blindsided when leaving college?
One option, according to financial experts, is to use one of the many budgeting apps, like Mint, to gain control over spending and budgets. But do these apps actually help?
Michael Thomas, who has his doctorate in financial planning and teaches the subject at the University of Georgia, said such apps are merely tools.
“We can if we choose to close our app, delete our app from our phone, not look at our app because we know that we spent way too much money,” Thomas said.
Budgeting apps aren’t effective unless they are used consistently to help develop good spending habits, he said.
“We kind of transfer the responsibility to the app,” said Thomas, “and what we don’t realize is that if you’re not really ready to engage in real financial choice-making and change, then the app in and of itself is not going to be sufficient to help you achieve your goal.”
He said many think downloading an app will automate the budgeting process, but he said that should only be the beginning. Students with a budgeting app, must maintain it, check the app and listen to what it tells them, Thomas said.
Thomas said there are two different mindsets—one where a person is not ready to make a real financial change and one where they are.
“The former mindset, the app is telling me what I can’t do. Oh, I can’t spend this, okay, no,” said Thomas, but “what people don’t realize is that when you have structure, you have more freedom. When you have less structure, you have less freedom.”
When someone is ready to commit to changing their financial habits, budgeting apps are useful tools to help, said Thomas.
Jade Wester, a University of Georgia student, said she looks at it like the app is telling her what she can’t spend. She also admitted she doesn’t look at it that frequently though, acknowledging that she probably is not ready to make a real financial change.
“I think more structure equals more freedom,” said Will Freeman, a University of Georgia student. “I tend to overspend, so I enjoy the app because it tells me what to do, and I don’t have to worry about overspending.”
Thomas said a budgeting app is most useful for someone when they are willing to change their spending habits, “because now you’re saying that I want to own a different reality with my money.”
A couple of years ago, there were only a few options, but Thomas said there has been a surge with over 40 options available now.
Not all budgeting apps are made the same, he said, adding that one of his favorites for students is YNAB, which stands for “You Need a Budget.”
Thomas explained this app, which has a small fee, is designed to trigger certain emotions and help develop spending habits. For example, debts that must be paid are highlighted in red. “And it triggers you. And then when you see that number growing, and it’s highlighted in red, you’re like, oh, this, this isn’t good,” he said.
Thomas said the functionality of budgeting apps will continue to improve.
“I think that we’re just at the very beginning of the sophistication of financial applications,” he said. “They’re going to become a lot more like the Weight Watcher type, setup and scheme, except for your money. Fairly smooth, quite honestly.”
Owen Burtt is a journalism student at the University of Georgia